Vermont milk panel warns that new law will hurt dairy farmers
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By Peter Hirschfeld Vermont Press Bureau - Published: January 16, 2008
MONTPELIER – A new law intended to shield Vermont's dairy farmers from milk-hauling fees will actually threaten the industry it aims to protect, according to a report issued this week by the Vermont Milk Commission.
The finding, one of several contained in the report, drew fire from at least one Vermont senator who accused the commission, chaired by Agriculture Secretary Roger Albee, of kowtowing to corporate interests.
But Albee says imposing what amounts to a rate hike on Vermont milk will price the state's farmers out of a competitive regional dairy market.
The law goes into effect in January of 2009.
"Based on the evidence so far … keeping this law on the book could have unintended consequences," Albee said during a joint meeting of the House and Senate Agriculture committees Tuesday.
A downturn in the price of milk in 2006 threatened to destroy Vermont dairy farms. Legislators responded last year by crafting a new law aimed at unburdening farmers from hauling costs, effectively forcing the bottling and processing facilities that purchase milk to absorb the transport fees.
"The idea is to allow dairy farmers to operate on the same model as every other business does – to push costs upstream whenever possible," Sen. Harold Giard, an Addison County Democrat and dairy farmer, said in an interview Tuesday. "That's exactly what this law is going to do, to unshackle our farmers from an age-old business model that every other modern business has pushed off."
Giard, who is on the Senate Agriculture Committee, said the commission's findings carry a corporate bias. "It shows how shabbily our dairy farmers are treated in this state," Giard said. "I'm very disappointed in the Agency (of Agriculture) for being donkeys and carrying the water of corporate interests."
Albee said the seven-member Milk Commission, appointed by Gov. James Douglas, spent six months taking testimony from cheese companies, bottling facilities and Vermont farmers and consumers. Evidence overwhelmingly indicated that processors would forego Vermont milk in favor of a cheaper product in New York or Pennsylvania, both of which produce significantly more milk than Vermont, according to Albee.
Vermont produced more than 2.5 billion pounds of milk in 2006, or 1.4 percent of the nation's milk supply. "It's a competitive issue," Bob Wellington, director of legislative affairs for Agrimark, said in a telephone interview Tuesday. "If we try to go change the whole terms of selling to customers, you create a demand problem for Vermont milk."
Agrimark, a regional cooperative that buys a sizeable share of Vermont's dairy output, merged with Cabot Cooperative Creamery in 1992. Wellington used his company's own operation as an example of why processors would bypass Vermont milk, should the law go into effect.
"For the amount of milk that goes into Cabot facilities, that hauling cost would be in excess of $5 million a year Cabot would have to absorb, and we compete with other cheese companies … all over the country," Wellington said. "We can't arbitrarily raise our prices if the competition doesn't."
Harold Howrigan, a Fairfield farmer on the Milk Commission, said the new law would especially hurt the state's most rural farmers, who would prove especially unprofitable to processing facilities seeking to shrink transport costs.
"Small farms up in the hills would be gone tomorrow if haulers had to pay that fee," Howrigan said.
But Giard called processors' doom-and-gloom testimony a predictable response to the specter of higher prices. Vermont milk, he said, is a good enough product to withstand those market forces. "When you factor this very tiny cost that would be pushed upstream, you can't measure it," Giard said.
And, Giard said, the legislation will take effect, "Come hell or high water."
"It's absolutely appalling the small-mindedness and narrow-mindedness of this group," he said. Lawmakers asked the commission to investigate other revenue-generating mechanisms for Vermont farmers, including an "over-order premium" for milk produced, processed and sold in the state of Vermont. But 51 percent of Vermont's fluid milk leaves the state before processing, according to the commission, and of the remaining 49 percent processed in-state, only about 10 percent is sold in Vermont. Since interstate commerce laws prohibit Vermont from tacking on a surcharge to milk sold out-of-state, an over-order initiative would generate limited revenue.
The commission also researched "minimum pricing" on Vermont milk, which would protect farmers from the cyclical downturns that, according to at least one study, tend to run in 33-month cycles. That option, too, the commission found, would place farmers at a competitive disadvantage. Farmers presently receive around $20 per hundredweight for milk, up from around $12 in 2006.
"Yes, the Milk Commission can control that price," said Mike Duane, an assistant attorney general who assisted the Milk Commission. "The practical question is what effect will that have on handlers and processors with regard to going elsewhere to get their milk."
The commission did recommend establishing a contingency pool, funded by haulers, farmers and tourism businesses that benefit from Vermont's agrarian image and open space. Ski resorts have expressed a willingness, according to an official with the Agency of Agriculture, to assess a $1 surcharge on lift tickets to build the contingency fund.
The commission also recommended a Fair Trade-style marketing effort to win premium retail prices for Vermont milk. Rep. David Zuckerman, a Burlington Progressive, chairs the House Agriculture Committee. He said he needs to learn more about the potential impacts of the 2007 hauling-fee law before he decides whether to support repealing it. He said in the meantime, Vermont needs to embark on a state-funded marketing campaign to raise the value of Vermont-brand milk and thus ensure the long-term viability of Vermont farms.
Demand for dairy products overseas, combined with droughts in New Zealand and Australia, have kept milk prices high, according to Albee. But Agency of Agriculture forecasters are wary of a cyclical price drop in 2009.
"We've got 'Happy Cows' from California," Zuckerman said. "Vermont could be building that brand. … We export so much of our milk. And we can leverage a premium in the marketplace."
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